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October 21, 2013

65? 70? 80? What’s the Real Retirement Age These Days?

EBRI, UBS and Swiss Re reports may disagree on the number, but they all agree that the age at which workers expect to retire is rising

So what’s the real retirement age these days? Is it 65? 70? Just how many 80-year-olds are actually working?

“Americans are starting to recognize that living longer will require a shift in retirement planning. For many Americans surveyed, 70 is the new 65," Swiss Re’s North American head of longevity, George Graziani, said in a statement on Monday, which marked the start of National Save for Retirement Week.

For those familiar with Americans’ lack of retirement preparedness (the average 401(k) balance is somewhere around $80,000, according to Fidelity Investments), Graziani’s statement sounds perfectly plausible. Yet UBS just released a new report saying that 80 is the new 60, while the Employee Benefit Research Institute (EBRI) warns that while the age at which workers expect to retire is slowly rising, the reality is that they may not be able to due to health problems or job loss.

The takeaway seems to be that age is just a number and a moving target because traditional views of retirement are changing.

The Swiss Re risk perception survey shows that the majority of Americans believe they’ll be working well into the years that have traditionally been viewed as retirement years. The survey shows than 57% of Americans workers expect to work beyond age 65 or never retire.

And 19% of U.S. respondents, more than in any other nation surveyed, said they would be working at least until 70, while 12% believe they never will be in a position to retire. The remainder, 21%, didn't know or couldn't answer when they believe that their working lives will end.

Compare those numbers to respondents in other nations surveyed, where 38% of workers globally think they'll retire by age 64 compared with just 22% of Americans. In China, Hong Kong and Brazil, survey respondents were most optimistic about their financial prospects for their retirement years, with 78%, 45% and 42% of respondents, respectively, saying they will retire before 64.

Conducted in partnership with global polling firm The Gallup Organization Europe, the survey canvassed nearly 22,000 citizens 15 and older across 19 markets in April and May.

The UBS Investor Watch report, meanwhile, revealed that most wealthy investors today say they don’t expect to feel “old” until they reach age 80 — a vast change from their parents’ generation, which viewed age 60 as old.

Even the concept of retirement has undergone a transformation, with the UBS report finding that only 16% consider retirement as a sign of being old. More importantly, Americans define old as the loss of individual independence, marked by no longer living in one’s own home, at 71%, and by losing the ability to drive one’s own car, at 67%.

"People do not see retirement as a sign of being old, as it was for their parents," said Emily Pachuta, head of investor insights, UBS Wealth Management Americas, in a statement. "What we're hearing from people is that age is nothing more than a number and the age when people feel old has gone way up."

On Sept. 12, EBRI also released a report on the expected retirement age, saying that the age at which workers expect to retire is slowly rising. “In 1991, just 11% of workers expected to retire after age 65. Twenty-one years later, in 2012, 37% of workers report they expect to wait until after age 65 to retire. At the same time, the percentage of workers expecting to retire before age 65 has decreased from 50% in 1991 to 24%,” EBRI reported.

But here’s the rub: expectations don’t always match reality. EBRI goes on to report that “a sizable proportion of retirees report each year that they retired sooner than they had planned,” with fully 50% doing just that in 2012. “Those who retire early often do so for negative reasons, such as a health problem or disability (51%) or company downsizing or closure (21%).”

And here’s another reality check: In 2010, the participation rate of those 65 and older in the labor force stood at 16.1%, a 4 percentage-point change from 1990, according to the U.S. Census Bureau. Further, a Gallup poll last May found that the average retirement age is 61.

“Whereas the average current retiree stopped working at age 61, those still working expect to work well beyond that age,” Gallup reported. “The average nonretired American currently expects to retire at age 66, up from 60 in 1995.”